On January 1, 2015, several amendments to the Illinois Wage Payment and Collection Act will go into effect which aim to provide a better framework for employer issued payroll cards. Payroll cards are similar to pre-paid debit cards issued by an employer that allows an employee access to their wages. Payroll cards are attached to a payroll card account which contains the deposits of the wages, and employees can use the cards to withdraw their earnings, or make payments directly from the card.
While payroll cards appear convenient and efficient on paper, their implementation has been less than convenient for the employees who received them. Wrought with hidden activation fees, point of sale fees, and other restrictions, the cards were not widely favored by employees. However, this year the Illinois Legislature took aim at the cards to make them friendlier, while outlining the responsibilities of the employer when offering the cards.
First, the Legislature has made acceptance of payroll cards completely voluntary on the part of employees. Employers cannot force their employees to use the cards, and must offer at least one additional non-voluntary option of payment. For example, an employer may not offer an employee only a choice between direct deposit and payroll cards, as both methods of payment are now voluntary. In order to be in compliance with the new law, the employer must also allow their employees to accept their wages by cash or check, and inform the employee in writing that the payroll card is voluntary.
In addition to providing the employee with information about different payment methods, the employer is also required to explain the terms and conditions of the payroll card. This includes: an itemized list of all fees that may be deducted from the account by the employer or card issuer; a notice that third party transaction fees may be assessed on the card; an explanation on how the employee may obtain their net wages and card balance, and how to request to receive paper or electronic transaction histories. After providing the employee with all of this information, the employer must then obtain the employee’s written or electronic consent to receiving a payroll card.
Once an employee has voluntarily accepted the payroll card, the obligation of the employer does not end. At that point an employer is required to provide at least one method of withdrawing the full wages from the card not less than twice per month, one transaction history per month at the employee’s request, and unlimited telephone access to obtain the card account balance at any time without being charged a fee.
Finally, the Legislature also limited the types of payroll cards that may be offered to employees. An employer may not use cards that charge fees for point of sale transactions, the initiation of the card, the deposit of wages, or participation in the card. Also, the card may only charge inactivity fees after one year of non-use, and must offer two declined transactions per month at no cost to the employee. The payroll card may also not be linked to any form of credit, and the employer or card issuer must provide protections against unauthorized use of the card.
While many of the regulations will ultimately become the responsibility of the card issuers to implement, employers are still responsible for ensuring that these guidelines have been met when offering payroll cards to their employees.
Should you have any questions about payroll cards or any other law that may affect the operation of your business, or would like to schedule a free initial consultation, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800 or contact us online.
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